Microsoft shocked investors yesterday by announcing another plunge in revenues and profits, sending the group's shares tumbling and leaving some analysts questioning the technology giant's prospects.

In its latest quarterly financial results, the world's biggest software company announced revenues of $13.1bn, down from almost $16bn over the same period last year. Profits for the last three months fell 29% to $3.05bn, down from $4.3bn for the fourth quarter of 2008.

While some of the drop could be attributed to customers waiting for the arrival of Windows 7 – due to go on sale this autumn – the company has also been struck by the tightening of the economy and a general slowdown in PC sales.

Until the previous quarter, the company had never experienced negative growth since going public 23 years ago.

The company's chief financial officer, Chris Liddell, said: "Our business continued to be negatively impact by weakness in the global PC and server markets. In light of that environment, it was an excellent achievement to deliver over $750m of operational savings."

Microsoft said it had made the savings through streamlining operations and cutting thousands of jobs, but admitted that it had spent large amounts on legal costs and redundancy packages. Legal charges totalled $193m, while the company also counted $108m in impairments and $40m in additional severance charges.

The results were lower than Wall Street analysts expected, with consensus guidance hovering at around revenues of $14.3bn – and shares dropped more than 7% in after-hours trading as a result.

Not everyone was depressed by the company's prospects, however. Katherine Egbert of Jefferies & Co said that although results were "tepid" there were "some green shoots".

Among those prospects is Windows 7, the latest version of the company's operating system. With PC sales underperforming, Microsoft is desperate for software to be a hit - particularly since the 2007 launch of its predecessor, Windows Vista, proved so difficult. That much-heralded product launch suffered problems, after customers discovered that many pieces of hardware would not work.